FRS vs ERS

[henrylbh]

Your formula is only valid if your RA is at FRS, and your topup monies from SA => BRS.

With ERS, u topup monies in RA from FRS to ERS, the formula should be :

Withdrawal = FRS - BRS, as reflected in CPFB reply to my Query.

In other words, the all-inclusive formula should be -

Withdrawal = ERS (or FRS) - BRS - top-ups?

And increasing FRS to ERS is considered as topping up regardless of whether it's from cash or SA/OA?

 

[maple96]

In other words, the all-inclusive formula should be -

Withdrawal = ERS (or FRS) - BRS - top-ups?

And increasing FRS to ERS is considered as topping up regardless of whether it's from cash or SA/OA?

Yes, I edited my previous post.

All Topup monies in RA cannot be withdrawn as lump sum. Topup monies in SA are treated differently based on source of funds.

 

[kelhot2001]

The interest earned in the Lifelong Income Fund matters, and it matters A LOT, because the interest earned is calculated into your monthly payout. If the LIF does not earn any interest, your monthly payout will be much lower.

It's completely false and misleading to claim that the interest in the LIF does nothing for you, because you definitely get the benefits out of the interest earned.

Yes you are right to say that the LIF interest are generated into monthly payout when you are alive (let talk about std/esc withdrawal, since basic is not affected). but if you died in between (66 - 89 of age, we are talking about half of the cohort which is about 22,000 people), the bequest lost into the plot (LIF) is around $40,000 to $130,000 depending on the death of age per person. This do include the 4% of the bequest incurred for the next 5 - 20 years, losses comparing to the people on basic plan who have the bequest. Dead man cant talk, remember .

These bequest amount losses into LIF , are they distributed as interest to existing alive member? Probably not, the funds are probably sitting in the pool to generate interest and to support people who live past 90. A rough calculation this bequest fund can easily generate up to $1billion to $2Billion

Again, those who live past 90 will thank CPF LIFE , but again those who die before that probably cant comment . So in actual fact, it is not CPF life that is supporting CPF life, it is the member of CPF life who support CPF LIFE. And we are forced into this system

 

[kelhot2001]

Yes, I edited my previous post.

All Topup monies in RA cannot be withdrawn as lump sum. Topup monies in SA are treated differently based on source of funds.

Say I top 90.5k cash over the years before age 55, my OA at 55 is 90.5k(normal contribution)plus 90.5 (cashtop over the years) . Total at 55 yrs old I have $181K, then after RA is created, I top up another 90.5k cashtop to max to ERS, I would have $271K in my RA

At 65, I opt for BRS+Pledge, so how much can I take out at 65?

As oppose to above, 2 more senario

1)I have 181K in my OA and SA , but I also did cashtop for many years to 90.5k cash before age 55.So at age 55, I transfer all to RA for ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

2)I have 181K in my OA and SA , but I also did cashtop 90.5k cash after age 55 to my RA to max ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

 

[maple96]

Say I top 90.5k cash over the years before age 55, my OA at 55 is 90.5k(normal contribution)plus 90.5 (cashtop over the years) . Total at 55 yrs old I have $181K, then after RA is created, I top up another 90.5k cashtop to max to ERS, I would have $271K in my RA

At 65, I opt for BRS+Pledge, so how much can I take out at 65?

As oppose to above, 2 more senario

1)I have 181K in my OA and SA , but I also did cashtop for many years to 90.5k cash before age 55.So at age 55, I transfer all to RA for ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

2)I have 181K in my OA and SA , but I also did cashtop 90.5k cash after age 55 to my RA to max ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

Only direct topups to SA matters, voluntary topups (3 accts) and transfer from OA to SA does not matter, so u need to re-identify your topups.

After u identify your topups to SA, just apply the formula for the answer then post here, we will help u verify

 

[kelhot2001]

Only direct topups to SA matters, voluntary topups (3 accts) and transfer from OA to SA does not matter, so u need to re-identify your topups.

After u identify your topups to SA, just apply the formula for the answer then post here, we will help u verify

Then treat all 3 senario as topup to SA lor

 

[maple96]

Say I top 90.5k cash over the years before age 55, my OA at 55 is 90.5k(normal contribution)plus 90.5 (cashtop over the years) . Total at 55 yrs old I have $181K, then after RA is created, I top up another 90.5k cashtop to max to ERS, I would have $271K in my RA

At 65, I opt for BRS+Pledge, so how much can I take out at 65?

SA topup 90.5, FRS 181k

Pledge/withdraw = FRS(181k) -BRS(90.5)- SA topups (90.5)= 0

As oppose to above, 2 more senario

1)I have 181K in my OA and SA , but I also did cashtop for many years to 90.5k cash before age 55.So at age 55, I transfer all to RA for ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

SA topup =90.5
CPFB will transfer 181k from OA/SA to RA = FRS (contains 90.5 sa topup)
U transfer 90.5 from OA/SA to RA = 90.5 to hit ERS

Pledge/withdraw = FRS-BRS-Sa topup= 0



2)I have 181K in my OA and SA , but I also did cashtop 90.5k cash after age 55 to my RA to max ERS$271K
Any difference if at 65, I opt for BRS+Pledge, how much can I drawout?

FRS = 181k, no SA topup,

Pledge/withdraw = FRS-BRS = 90.5

see above in red, amt to be withdrawn is subject to sufficient property charge/pledge.

 

[kelhot2001]

see above in red, amt to be withdrawn is subject to sufficient property charge/pledge.

Swee, now I know lol, so lastly ERS is never allow to be transfer out

 

[maple96]

The interest earned in the Lifelong Income Fund matters, and it matters A LOT, because the interest earned is calculated into your monthly payout. If the LIF does not earn any interest, your monthly payout will be much lower.

It's completely false and misleading to claim that the interest in the LIF does nothing for you, because you definitely get the benefits out of the interest earned.

Now this is circulating in Yahoo news, "chicken and duck talk" the other view:

http://theindependent.sg/cpf-life-w...mbers-accumulated-interest-if-they-die-early/

 

[BBCWatcher]

Now this is circulating in Yahoo news, "chicken and duck talk" the other view....

Leong Sze Hian‘s quote is pretty silly. He asks whether any other national pension systems don’t pay heirs a particular portion of (above market) interest. Yes, practically all of them! Most national pension systems don’t have any residuals. They are pure (or at least near pure) longevity insurance systems.

The U.S. Social Security system, for example, usually pays a fixed death benefit of US$255 (2019 figure, adjusted annually for inflation). If there’s a surviving spouse (opposite or same sex) who was receiving a lower monthly benefit amount, then that surviving spouse’s own monthly retirement benefit ends but he/she starts receiving his/her departed spouse’s higher monthly amount. But that’s it. If you start receiving monthly benefits at age 62 (earliest age allowed), then die at age 62.1, that’s it — the books are closed. It doesn’t matter if you contributed US$200,000 into the system for example. Actually, if you die at age 61 (before benefits even start) then the books are closed, too. Or 42. There’s only the modest death benefit (usually) and some survivors benefits (if you have survivors). There’s no pile of money for heirs at the end of the rainbow. There is no bequest as such, ever.

And most national pension systems work this way. Honestly, some Singaporeans need to take a look at the rest of the world once in a while and decide whether they like what they’ve got or not. If you like a retirement income system that emphasizes bequests to heirs, then Singapore has the world’s best such system. As it happens, I think that’s not smart, but many Singaporeans seem to like their “insurance must always pay me (or somebody)” mindset, and so we end up with expensive insurance (high premiums) that pays low benefits to practically everyone. Because we must always “win.” It’s a form of financial abuse, but hey, we seem to want it. (Well, I don’t, but I seem to be in the minority here.)

 

[maple96]

The interest earned in the Lifelong Income Fund matters, and it matters A LOT, because the interest earned is calculated into your monthly payout. If the LIF does not earn any interest, your monthly payout will be much lower.

It's completely false and misleading to claim that the interest in the LIF does nothing for you, because you definitely get the benefits out of the interest earned.

ok I am attending a CPF talk later, so now got little bit of time, I quickly do this writeup:

Dork32 is talking about if he choose Basic Plan, effectively he only earns 3.2% on his RA balance at 65, the maths as follows, simplified just for calculation exercise purpose:

Balance in RA at 65 =200k
CPF Life Premium =20% = 40k
Balance in RA after premium = 160k
RA 4% interest on 140.8k = 6400
Effective interest on RA balance of 200k = 6400/(160k+40K) = 3.2%

Although CPF Life Premium earns 4% interest, it gets paid into the CPF Life pool. Under Basic Plan, mthy payouts starts from RA until 90, then payouts come from CPF Life pool.

If dork32 thinks he will not survive past 90, then he will never get to enjoy the 4% interest paid in the CPF Life pool. It is as good as zero, ie he write-off that 4% interest, treat it as bad debt in accounting 101. But his capital or premium of 40k he will be able to get back. That's how he derive the effective interest of 3.2% on his capital of 200k, as calculated above.

It is not incorrect, false or misleading for his own accounting treatment of his assets. Should he survive after 90-93, he will be getting CPF Life mthly payouts from the pool which includes the 4% interest accumulated there for 25+ years. Then he can start accounting for it as his “recovery of bad debt” or “profit” if he survives longer.

Remember, the 40k premium sits in the CPF Life pool for 25 years (from 65 to 90 if he starts at 65), if he die before 90, he loss all 4%*40k compounded over 25 years!

So we are only talking about Basic Plan, if we die before 90.

 

[henrylbh]

Remember, the 40k premium sits in the CPF Life pool for 25 years (from 65 to 90 if he starts at 65), if he die before 90, he loss all 4%*40k compounded over 25 years!

So we are only talking about Basic Plan, if we die before 90.

Take the interest loss as an insurance he is forced to buy if he passed 90. But it's not just loss of interest, the principal amount of 40k is also gone if he doesn't survive long after 90.

 

[Mecisteus]

Take the interest loss as an insurance he is forced to buy if he passed 90. But it's not just loss of interest, the principal amount of 40k is also gone if he doesn't survive long after 90.

Huh I thought you will get back the unused premium without interests.

 

[Mecisteus]

Now this is circulating in Yahoo news, "chicken and duck talk" the other view:

http://theindependent.sg/cpf-life-w...mbers-accumulated-interest-if-they-die-early/

This guy is a joke and a clickbait.

I think only 10% of the article are his own words. The rest are taken elsewhere.

A honorary member of Harvard who doesn't really understand how insurance work?

You want a lifetime payout but where is the insurance portion going to come from?

 

[babyrobo]

If say a total of $20K SA only top-up is done before 55 years old, is this amount and/or the compounded interest earned from this $20K topup excluded from the total amount calculations of BRS? And if excluded.. Where is this money parked?

Does it make more economic sense if we feel we will die early to simply go for the BRS? Or we don't really have anyone to bequest to?

 

[Mecisteus]

I posted this elsewhere and I will post here again.

CPF Life Basic -> Partial longevity insurance. Good for those who don't believe in insurances but you are still receiving small lifetime payouts. You pay less insurance premiums.

CPF Life Standard / Escalating -> Pure longevity insurance. You will get higher lifetime payouts. On the flip side, you need to pay more insurance premiums.

 

[kelhot2001]

ok I am attending a CPF talk later, so now got little bit of time, I quickly do this writeup:

Dork32 is talking about if he choose Basic Plan, effectively he only earns 3.2% on his RA balance at 65, the maths as follows, simplified just for calculation exercise purpose:

Balance in RA at 65 =200k
CPF Life Premium =20% = 40k
Balance in RA after premium = 160k
RA 4% interest on 140.8k = 6400
Effective interest on RA balance of 200k = 6400/(160k+40K) = 3.2%

Although CPF Life Premium earns 4% interest, it gets paid into the CPF Life pool. Under Basic Plan, mthy payouts starts from RA until 90, then payouts come from CPF Life pool.

If dork32 thinks he will not survive past 90, then he will never get to enjoy the 4% interest paid in the CPF Life pool. It is as good as zero, ie he write-off that 4% interest, treat it as bad debt in accounting 101. But his capital or premium of 40k he will be able to get back. That's how he derive the effective interest of 3.2% on his capital of 200k, as calculated above.

It is not incorrect, false or misleading for his own accounting treatment of his assets. Should he survive after 90-93, he will be getting CPF Life mthly payouts from the pool which includes the 4% interest accumulated there for 25+ years. Then he can start accounting for it as his “recovery of bad debt” or “profit” if he survives longer.

Remember, the 40k premium sits in the CPF Life pool for 25 years (from 65 to 90 if he starts at 65), if he die before 90, he loss all 4%*40k compounded over 25 years!

So we are only talking about Basic Plan, if we die before 90.

This is not what I understand

https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life#

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

Is this not the premium interest earn in LIF which will be return into your RA

 

[Mecisteus]

This is not what I understand

https://www.cpf.gov.sg/Members/Schemes/schemes/retirement/cpf-life#

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

Another STATEMENT from CPF
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.

Is this not the premium interest earn in LIF which will be return into your RA

When you choose CPF Life Basic, your retirement money will be split into
80% -> RA
20% -> LIF

The 80% will earn interests and they belong to you.

The 20% can potentially earn as high as 30% pa but they don't below to you.

I thought you have gone through this so many times?

 

[kelhot2001]

When you choose CPF Life Basic, your retirement money will be split into
80% -> RA
20% -> LIF

The 80% will earn interests and they belong to you.

The 20% can potentially earn as high as 30% pa but they don't below to you.

I thought you have gone through this so many times?

Well, I posted this below information from CPF, It doesnt seem so as you say

CPF LIFE

Q Will my savings used to join CPF LIFE (i.e annuity premiums) continue to earn interest?
A
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.


Q Where will the extra interest be paid to after I join CPF LIFE?
A
If you have chosen the CPF LIFE Standard Plan or CPF LIFE Escalating Plan, the extra interest will be paid into the Lifelong Income Fund. By paying the extra interest into the Lifelong Income Fund, you will be able to enjoy a more stable payout for the rest of your life. The extra interest will be pooled and factored into your monthly CPF LIFE payouts.

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

Am I understanding wrongly ?

 

[01asdf]

Well, I posted this below information from CPF, It doesnt seem so as you say

CPF LIFE

Q Will my savings used to join CPF LIFE (i.e annuity premiums) continue to earn interest?
A
Your savings used to join CPF LIFE (i.e. annuity premiums) will continue to earn interest like your Retirement Account (RA) savings, which is currently at 4% per year. The interest earned on the annuity premiums will be paid to the Lifelong Income Fund and pooled together with the interest of all CPF LIFE participants. The interest will be paid to you as your monthly payouts for as long as you live.


Q Where will the extra interest be paid to after I join CPF LIFE?
A
If you have chosen the CPF LIFE Standard Plan or CPF LIFE Escalating Plan, the extra interest will be paid into the Lifelong Income Fund. By paying the extra interest into the Lifelong Income Fund, you will be able to enjoy a more stable payout for the rest of your life. The extra interest will be pooled and factored into your monthly CPF LIFE payouts.

If you have chosen the CPF LIFE Basic Plan, we will pay the extra interest earned into your Retirement Account and pay it to you in the year it is earned as part of your monthly CPF LIFE payout. When your combined balances fall below $60,000, the extra interest will reduce. This reduces your monthly CPF LIFE payouts gradually.

Am I understanding wrongly ?

Key word here is CPF LIFE Basic Plan. The interest on the 80% *not* transferred to Lifelong Income Fund but left in your RA will go into your RA.

The interest on the annuity premium gets pooled into the Lifelong Fund and distributed to everyone.